India and the US have agreed to share information on financial accounts held in each country by their citizens in a major step towards preventing unaccounted wealth being stashed abroad.

India will sign an agreement with the US that would enable New Delhi share information about accounts and investments held by US citizens in various Indian financial institutions.

The idea is to help US crack down on its citizens using Indian banks and other entities for parking their funds away from the eyes of the US Internal Revenue Service (IRS). The US tax authorities will oblige India in the same way to reach accounts held by Indians there but are not reported to the Income Tax department here.

“We are proposing to enter into an agreement with the US government as per which we would be giving them some information. It would also enable us to get some information about Indians holding undisclosed accounts in the US,” said a government official.

US is seeking information from 50 nations including India under its Foreign Account Tax Compliance Act (FATCA) that will come into force on July 1. India has agreed to be part of the list of partner nations from April 11, said the US treasury.

The move is set to significantly benefit the US, which follows a system of taxing the worldwide profits of both US residents as well as citizens who are not residents.